Exam 5: Elasticity and Its Application

If you enjoy buying luxury goods more than buying groceries, your income elasticity of demand for luxury goods will be less elastic than for groceries.

If the quantity supplied of a good responds strongly to a change in the price of an input:

Oliver makes guitars.There are four other guitar shops that also make good guitars on the same street.If Oliver wishes to increase his total revenue, he should:

Graph 5-4 -Refer to Graph 5-4.Total revenue at P₂ would be represented by area(s):

When the price of digital SLR cameras was $2000, consumers bought 4000.When the price fell to $1200, consumers bought 5000.What was the price elasticity of demand between these two prices, calculated with the midpoint method? Is demand elastic or inelastic?

The midpoint method is used to calculate elasticity because it gives the same answer regardless of the direction of the change between two points.

If the demand curve is linear and downward-sloping, which of the following would NOT be correct?

Suppose you are the manager of a theatre.You currently charge the same admission price to all customers, regardless of age.You hire an economist to determine the price elasticity of demand for admissions by age and he tells you that at the current price, demand by adults is inelastic and demand by children is elastic.If you want to increase your total revenue by adjusting admission prices, how should they be adjusted?

In the aftermath of the US decision to halt logging of Pacific North-West forests in 1990 to protect spotted owls, the global demand for Australian and New Zealand timber jumped.Predict how Australasian forestry companies responded to the increased demand in the short run and in the long run.

Supply tends to be:

A perfectly inelastic demand curve:

Graph 5-1 -In Graph 5-1, the section of the demand curve labelled A represents the:

Recently, the price of a Kit Kat fell from $1.80 to $1.50.As a result, the quantity demanded of Mars Bars decreased from 1200 to 1000.What would be the appropriate elasticity to compute? What does your answer tell you?

A perfectly inelastic demand implies that:

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. $\begin{array}{|c|c|}\hline \text { Price per coffee (\$) } & \text { Quantity demanded } \\\hline 4.00 & 200 \\\hline 3.00 & 600 \\\hline 2.50 & 800 \\\hline 2.00 & 1000 \\\hline 1.50 & 1200 \\\hline 1.00 & 1400 \\\hline\end{array}$ -Referring to Table 5-1, comparing the sales at $1.00 and $3.00, which of the statements below is true?

Suppose a demand function yields an equilibrium price of $5.00 and an equilibrium quantity of 50 000 individual units.The equilibrium quantity could also be expressed in units of 1000, yielding an equilibrium of $5.00 and 50 units.How would expressing the quantity in units of 1000 affect the value of the slope and the elasticity?

A given leftward shift in the supply curve of product X will increase equilibrium price to a greater extent, the:

Table 5-2 Quantities urchased $\begin{array}{|c|c|c|}\hline \text { Income(\$) } & \text { Good X } & \text { Good Y } \\\hline 30000 & 2 & 20 \\\hline 50000 & 5 & 10 \\\hline\end{array}$ -Refer to Table 5-2.Good Y is:

Suppose that 50 candy bars are demanded at a particular price.Using the midpoint method, if the price of candy bars rises by four per cent, the number of candy bars demanded falls to 48 candy bars.This means that the:

Get Smart University (GSU) is contemplating increasing tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue they are: